Ford Motor Credit megadeal drives by, as do AmeriGas, Antero; existing HCA, Ford Credit busy

By Paul Deckelman

New York, July 27 - For a second straight day, high-yield primaryside players saw a quickly marketed, giant-sized new deal from a familiar issuer on Wednesday, as Ford Motor Credit Co. LLC drove by with a $1 billion offering of 10-year notes. That followed the even bigger megadeals that came to market on Tuesday from HCA Inc. and Reynolds Group Holdings Ltd.

Counting Wednesday's other new deals - an upsized $400 million transaction from energy name Antero Resources Finance Corp. and a $450 million offering from propane seller AmeriGas Partners, LP - as well as several other bonds sales of under $1 billion that priced earlier in the week, Junkbondland looked on track to rack up its biggest new issuance week in more than two months, absolutely blowing away the relatively meager new issuance totals seen in the intervening weeks of late May, June and July.

When the new Antero bonds hit the aftermarket, traders saw them firm smartly from their par issue price. However, the day's other two credits seemed to remain tethered to that par level.

That's where they also saw HCA's $5 billion new deal, which had priced very late in the session on Tuesday, too late for any dealings at that time. Reynolds' deal, meantime, gave back some of the gains seen in the initial aftermarket foray by the consumer packaging products company's new deal.

The traders also saw very brisk activity in HCA's existing bonds, particularly the 2016 cash-pay issue, which is going to be taken out using the proceeds of the hospital operator's radically upsized new deal. Ford Credit's outstanding bonds also saw a fair amount of trading.

Away from issues with new deal connections, traders saw the overall junk market lower, borne out by statistical measures, but still no big panic, even amid falling stocks.

Ford pays a visit

Ford Motor Credit, certainly a familiar name to junk bond investors, unexpectedly drove up to the borrowing window on Wednesday and drove away with a truckload full of fresh money - $1 billion of it, to be precise.

The Dearborn, Mich.-based company's offering of 10-year senior notes (Ba2/BB-) was the third junk bond transaction of $1 billion or more to come to market in the past two days, following on the heels of the megadeals from HCA and Reynolds Group Holdings that priced on Tuesday.

High-yield primaryside sources said that the quickly shopped Ford Credit notes priced at par to yield 5 7/8%, in line with pre-deal market price talk.

The issue came to market via joint bookrunning managers Barclays Capital Inc., Goldman Sachs & Co., HSBC Securities (USA) Inc. and RBS Securities Inc., while BNP Paribas Securities Corp., Credit Agricole Securities (USA) Inc., Samuel A. Ramirez & Co., Inc, and Wells Fargo Securities, LLC were co-managers on the offering.

A syndicate source said that the benchmark-sized deal came off the high-grade desks, despite the nominally high-yield ratings the bonds carry - a de facto recognition of the attractiveness of Ford Credit paper to ostensibly investment-grade crossover investors digging for yield.

Ford Credit, the automotive financing arm of Ford Motor Co., which is the No. 2 domestic car and truck manufacturer, plans to add the net proceeds from the bond deal for use in the purchase of receivables, for making loans to car buyers and to Ford dealers and for use in connection with the retirement of debt.

AmeriGas makes an appearance

The Ford deal, while clearly the biggest transaction of the day, was but one of a trio of quickly shopped drive-by deals that priced just a few hours after being first announced.

Another such transaction was the $450 million offering of eight-year senior notes (Ba3/) from AmeriGas Partners, LP and its AmeriGas Finance Corp. unit, which priced at par to yield 6¼%, in line with their price talk.

That transaction was brought in via joint bookrunners Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Wells Fargo and Citigroup Global Market Inc. Co-managers on the offering were Morgan Stanley & Co. LLC, PNC Capital Markets LLC and RBS.

AmeriGas, based in King of Prussia, Pa., is a retail and wholesale distributor of propane gas. It plans to use the proceeds from the new deal to finance its separately announced tender offer for its $350 million of outstanding 7 1/8% senior notes due 2016, which is scheduled to run through Aug. 23, as well as for general corporate purposes, including repaying borrowings outstanding under the bank credit agreement of the company's operating partnership, AmeriGas Propane, LP.

Antero upsizes

Antero Resources priced an upsized $400 million offering - also an opportunistically timed quick-to-market affair.

The eight-year senior notes (B3/B) priced at par to yield 7¼%, in line with talk. The offering was increased from the originally announced $300 million.

The deal was done via joint bookrunners J.P. Morgan, Wells Fargo and Barclays.

A lengthy roster of co-managers included BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Banc Securities Inc., Comerica Securities, Inc., Lloyds Securities Inc., Mitsubishi UFJ Securities (USA) Inc., KeyBanc Capital Markets Inc. and U.S. Bancorp Investments, Inc.

The issuer is a unit of Denver, Colo.-based energy exploration and production company Antero Resources LLC, which said it plans to use the estimated net proceeds of $392.8 million to repay borrowings under its senior secured revolving credit facility and for general corporate purposes. The latter category includes potential acquisitions of additional properties in its core areas.

Why now?

A primaryside source opined, "I think all the deals went well" and priced pretty much at fair value, as illustrated by their respective aftermarket levels.

"Everything seems to have held steady, despite what was going on with equities," where investors were positively getting killed due to angst about the continued debt ceiling deadlock in Washington. The bellwether Dow Jones Industrial Average plunged another 198.75 points, or 1.59%, to end at 12,302.55, and broader market indexes replicated that fall.

Even though the junk bond market sometimes seems like it is operating on its own little planet - far removed from the macroeconomic concerns that play havoc with stocks, the dollar, Treasuries and investment-grade corporate, which are closely tied to the government paper - some of what is going on in that outside world, such as the debt debacle, may be seeping through.

A trader theorized that "maybe these companies" bringing junk deals - and big ones - right now "are thinking that maybe with the nonsense that's going on in Washington, if they really screw things up, they'd better borrow money now - when they can - rather when they have to."

He remarked: "It does seem kind of odd that just out of the blue that this week in late July has been such a new issue machine."

With just half the week gone, new issuance has already topped the $11 billion mark between the three giant deals, as well as other deals like AmeriGas and Antero, Tuesday's upsized $400 million offering from Canadian oilfield services company Precision Drilling Corp. and Monday's $450 million transaction from sporting goods retailer Academy Ltd.

That puts this week on track to be the biggest week new issuance-wise since the week ended May 20, when over $12 billion came to market, or even the week ended May 15, when over $15 billion of new paper priced.

Another trader acknowledged that he was "sure that the bankers used that tactic; they said [to the issuers] 'look, you'd better come now,' and the reception that HCA got was much better than anyone expected, so it worked out perfectly for them."

That having been said, though, he suggested that rather than being all due to a sudden rush to borrow ahead of whatever may or may not happen on Aug. 2, the sudden borrowing surge may just be a factor of borrowers once again feeling the time is right for tapping the junk market.

"The market was kind of mushy" during all the weeks when new deal levels were low in the $2 billion or so weekly range." Now, he said, "the market has solidified a little bit."

For instance, he said, the widely followed CDX high yield has been around 100-101 this week, while just a couple of weeks ago, it was carrying a 99-handle, and other measures behaved similarly.

"Maybe the little scare the market had in June put the brakes on everything, and now that the market has stabilized for a week or two, they're starting to come again, rather than getting ginned up to do something before you're sure the market is stable."

He also further noted the looming approach of another August deadline besides the one that is the focus of the debt talks: the traditional mid-August summer shutdown in the junk market, when it becomes absolutely impossible to get any kind of a deal done until after Labor Day.

With July almost done for, that unofficial but reliable August closing of the window of opportunity may also be a factor in encouraging issuers to get their deals done now.

New deals hit the aftermarket

When the new Ford Credit deal was freed forsecondary trading, a market source pegged those bonds at par bid, 100¼ offered, versus the par issue price at which the mega-deal had come to market.

Other traders also noted that the big auto finance company's bonds traded very tightly to their issue price, an indication, they said that the bonds were priced appropriately in terms of their perceived value to investors.

Another trader, after seeing the Ford Credit paper inch up just a fraction of a point, saw those bonds going out straddling issue at 99 7/8 bid, 100 1/8 offered.

The new AmeriGas issue behaved similarly; a trader exclaimed that they're "not going anywhere," just holding near their par issue price.

A second trader saw the new bonds "tied up" at par bid, 100¼ offered, while at another desk, a trader saw them going home at 100 1/8 bid 100 3/8 offered.

However, the new Antero Resources deal proved to be the exception to that rule; a trader saw the Denver-based oil and gas E&P company's new issue having pushed up to 100¾ bid, 101 ¼ offered, versus a par issue price.

A sell-side source also said that the new Antero bonds had firmed by about a point or maybe even a little more, when they were freed.

HCA holds to issue

Looking at the deals priced on Tuesday, traders said that Nashville-based hospital giant HCA Corp.'s $5 billion of new paper was just a bit higher than the par level at which both its $3 billion of 6½% senior secured first-lien notes due 2020 and its $2 billion of 7½% senior unsecured notes due 2022 had priced late in the day Tuesday, too late for any trading then.

One quoted the 2020 bonds at 100.3125 bid, 100.4375 offered, while seeing the 2022s at 100 3/8 bid, 100½ offered.

Another trader quoted the 2020s at 100½ bid, 100 5/8 offered and the 2022s at 100 3/8 bid, 100½ offered, but said that HCA "did really well, when you consider that the equity market was getting killed" and generally dragging things lower, even in the junk precincts.

However, Reynolds Group's bonds, which had firmed to around the 102 level going home after pricing just a little south of par on both tranches on Tuesday, came off those highs and gave back more than half of those gains on Wednesday.

A trader said that its $1.5 billion of 7 7/8% senior secured notes due 2019 had come in by Wednesday afternoon to around 100¾ bid, 101½ offered, while its $1 billion of 9 7/8% senior unsecured notes due 2019 had dipped from Tuesday's peaks down to 100½ bid, 101¼ offered.

Tuesday's other deal - the $400 million of 6½% notes due 2021 from Calgary, Alta.-based oilfield services company Precision Drilling - though, stayed strong with a trader seeing them on Wednesday at 102 bid, 102½ offered. This was well up from the par level at which they had priced and about where those bonds had finished the previous session.

HCA gets busy

With the big new deals consuming so much of the junk market's attention, a secondary trader said that it came as no surprise that "the top five names" on the junk most actives list would be existing issues of HCA and Ford Credit bonds, as investors sought to position themselves in the wake of the big new issues from those companies.

For instance, he noted that the busiest of all was HCA's 9¼% notes due 2016, which saw over $46 million traded. Those bonds were actually little changed on the day around 106¾ bid - the level to which they had moved up on Tuesday after HCA radically upsized its two-part deal to $5 billion from the originally announced $1 billion.

Other HCA paper was lower, such as its 7¼% notes due 2020, of which $16 million traded on Wednesday; those bonds dropped to 106¾ bid from levels noth of 107 at the close on Tuesday and near 109 at the beginning of the week.

As for Ford Credit, a market source saw its 5% notes due 2018 gain nearly 2 points in active dealings to end at 101¾ bid, but its 5¾ % notes due 2021 were pegged down, more than 3 points on the session, at just under 101.

Market indicators head lower

Away from the new deal precincts, traders said statistical indicators, which had been mostly firm on Tuesday, weakened on Wednesday, perhaps continuing to reflect the negative tone in equities amid the continued debt ceiling political standoff.

A trader saw the CDX North American Series 16 HY Index fall 9 1/16 of a point on Wednesday to 100 7/16 bid, 100 9/16 offered versus the 1/16 of a point gain on Tuesday.

The KDP High Yield Daily Index dipped by 7 basis points Wednesday to 75.57, after it had edged up by 1 bp on Tuesday. Its yield rose by 2 bps to 6.64%, after having been unchanged for the previous two sessions.

And the Merrill Lynch High Yield Master II Index showed its first loss in seven sessions on Wednesday, going down by 0.077% versus Tuesday's 0.093% rise.

That left its year-date return at 6.279%, down from Tuesday's 6.362%, the new peak level for 2011.

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